You may be tying up thousands of dollars of cash in places you least expect. To get more .. Do This.


In this issue ....


  • Gaining more cash takes discipline

  • 353 words, a less than 2 minute read.

We encounter companies who manage their collections and purchasing to perfection.

These companies rarely see receivables or inventory exceed 30 days of revenue or cost of goods respectively. How do they do it? They make every day count They are obsessed with no invoice to a client or an item in inventory exceeding 30 days They are proactive in requesting payment; diligent in following up and relentless on making sure inventory moves. Because of these practices they have less than 10% of their revenue dollars in AR and Inventory. (Note: If you do not carry inventory as an asset, does not mean you don't have cash tied up in inventory). Because they are lean, they have more assets in cash than other companies, they are usually better at deposits and advances too; hence have a negative days' cash cycle: that is converting an order to completion and collection. So, adopt these disciplines to keep more cash:

  • Set payments to dates not events like substantial completion

  • Collect for small projects upfront and service when performed

  • Leave only 5% for final on projects more than one week in duration

  • Be prompt on requesting payments: follow up, follow up, follow up.

  • Limit email as your go to collection practice; use the phone strike a relationship with the payer be cordial and professional.

  • Order goods to arrive one week before needed

  • Do not buy into stock

  • Every month review invoices over 30 days put on red alert require an action. Designate a AR owner.

  • Every month review inventory list over 30 days in house act to move it. Designate an Inventory owner.

  • Have vendors who take stock back without restocking fees and credit against new orders.

  • Have a tight process for returns coming back from job sites and being dispositioned.

  • Keep public the AR and InV scores so everybody can help. Celebrate success!

Remember profit accumulates cash. Asset mgmt. helps more of it transition faster. Excess AR and INVENTORY ultimately lead to write offs and 100% losses on the assets. Become a culture of respecting the assets of the company. Really good companies take pride in managing this aspect of the business.

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